As the global economy began to emerge from the pandemic, uncertainty became the dominant theme driving B2B decision-making. CEOs and other business leaders looking to navigate this business environment began to weigh the impact of several global trends:
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- Global Supply Shocks: The pandemic, international conflicts, and stretched supply chains caused price increases economy-wide. This phenomenon occurred unevenly across sectors and significantly impacted businesses with narrow margins.
- High Inflation: The Coronavirus pandemic led to the sharpest decline in GDP since the Great Depression in the early months of 2020. In response, most economies adopted relief measures to fill the demand gap. In the US, GDP growth returned to the previous trajectory in months rather than years, driving persistent inflation.
- High-Interest Rates: To quash rising inflation, central banks worldwide raised interest rates. In the US, this rate environment stood in stark contrast to that of the previous decade, upending many sectors (like high-tech and real estate) that had been fueled by low borrowing costs.
- Post-Pandemic Demand Shifts: Many industries, particularly the software / high-tech sector, underwent significant growth from 2020 through 2022 in response to a shift of work and commerce to the cloud. The physical economy also saw a sudden shift away from services towards goods consumption and savings. These trends receded as the economy began to return to normal, and companies that had benefited started to experience sharp downturns in growth.
- Macroeconomic Uncertainty: These shocks sparked a significant debate over whether or not a recession was around the corner in 2023 and 2024. For corporate leaders looking to navigate this unclear climate, a posture of risk aversion and protecting profits over prioritizing growth was visible across sectors.
For most sectors, a combination of the above factors has led to the dominant economic story of 2024 – a wave of reductions in force across leading B2B organizations. This year alone, companies like Google, Wayfair, Citigroup, Salesforce, Meta, and more have announced reductions-in-force (RIF).
In media reports, reductions-in-force are commonly confused with “layoffs.” There is an important technical distinction between the two: layoffs apply in scenarios where there is a decline in demand for goods that drives reductions in employment. In contrast, RIFs are strategic decisions to reduce headcount to achieve labor cost savings, boost efficiency, and streamline processes. In a world where investors are demanding profitability, reductions-in-force have become a logical, yet painful, choice.
RIFs have been especially pronounced for sales professionals. Affected positions at companies like Docusign, Google, and Microsoft were concentrated in sales and other customer-facing roles. The individuals and B2B teams that are fortunate enough to emerge from an RIF unaffected face several challenges in 2024. In each of these cases, a focus on Value Selling can help them survive and thrive in the coming year:
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- Fighting for Scarce Wallet Share: Before resorting to a reduction-in-force, companies typically implement cost-cutting initiatives, such as reducing non-essential corporate travel, hiring freezes, and pauses on new IT purchases and other major new investments. The latter has significant ripple effects for B2B sales teams, especially those selling software/high-tech solutions to new accounts.
In early 2023, Gartner halved their growth forecast for worldwide IT spend due to economic uncertainty and a glut of pandemic-era investment. These same dynamics have impacts outside the software industry, particularly those selling innovative, premium B2B solutions. Economic uncertainty and rising interest rates put the brakes on overall CapEx investment in 2023, squeezing industrial and manufacturing suppliers.
Competition is fierce for B2B companies looking to capture their share of their customer’s investment budget. To stand out, companies need to ensure that their solutions are seen as essential to impacting their customers’ bottom line in 2024 and beyond. In a time of scarcity, value selling has never been more critical.
Sales reps who are able to communicate a vision of value to the customer win the deal 74% of the time. This is because these highly effective salespeople cut through the standard jargon of features and benefits and focus on the magnitude of their solution’s impact on their customer’s business. By building an initial business case that incorporates the customer’s own data, sales can quickly catch the attention of buying committees and unlock access to key decision-makers. - Increased Purchasing Skepticism: In 2023, purchasing teams showed increasing levels of scrutiny over significant investments. A report by Ebsta found that win rates dropped 15% from 2022, while sales cycles lengthened by 32% in the same period. Sales teams who have recently experienced an RIF are wading into a selling environment where only the most essential of investments get executive sign-off. This slowdown in sales velocity is the biggest threat for sales teams seeking to hit quota this year.
Value selling has the power to flip the script for B2B sales because it impacts all four elements of the sales velocity formula by growing the number of qualified opportunities, increasing average deal size, boosting win rates, and reducing sales cycle time.
By centering economic value delivered in every sales touchpoint in a clear, persuasive manner that incorporates the prospect’s own data, B2B sales teams can continue the initial value conversation that helped them stand out from the competing alternatives, increasing the odds that the buying committee will find the investment worthwhile, fast-tracking executive buy-in, and reducing discounting pressure from procurement. LeveragePoint customers who have deployed value selling successfully have realized 5-15% higher win rates, 5-25% higher prices, and reduced sales cycle times of up to 50-75%. - Doing More With Less: For B2B sales, a reduction in force doesn’t usually result in a reduction in corporate sales goals. If the revenue target increases, with fewer reps as coverage, most sales teams see their quotas increase in the coming year. Sales reps not impacted by the RIF are expected to become a leaner operation, shouldering the burden in several ways: covering larger territories, selling additional product offerings, and continuing to service and nurture existing accounts. RIFs rarely hit sales in isolation, so there is typically a reduction in headcount in marketing, customer success/support, and sales enablement roles that are critical to supporting sales success.
One meaningful way to streamline the sales process for B2B sales teams impacted by RIF is to have them focus on the right opportunities – the ones with the strongest chance of closing. 40% of B2B opportunities are lost not to the competition but to the status quo. Reps that engage in value selling can quickly generate an initial business case with the buyer, unearthing the accounts where there is need, urgency, and fit. Interactive marketing tools (like LeveragePoint Value Campaigns) can help target and engage early-stage prospects at these accounts, helping to kickstart value selling conversations. This customer focus can help quickly disqualify opportunities where one or more are not there, and focus reps’ time on accounts where there is an opportunity to make a substantial financial impact, increasing the number of qualified opportunities in the process.
More broadly, a scalable, repeatable process for communicating value is critical. Investing in a value selling technology that makes capturing the benefits of value selling easy without requiring the construction of bespoke presentations, one-off spreadsheet calculators, or extensive marketing and presales support. LeveragePoint Value Stories enable individual sales reps to select a value story from a pre-built library and customize it with the prospect or customer during sales meetings, creating a shared business case to buy to share with internal stakeholders and decision-makers.
- Fighting for Scarce Wallet Share: Before resorting to a reduction-in-force, companies typically implement cost-cutting initiatives, such as reducing non-essential corporate travel, hiring freezes, and pauses on new IT purchases and other major new investments. The latter has significant ripple effects for B2B sales teams, especially those selling software/high-tech solutions to new accounts.
Looking Across The Chasm
The primary outcome of a reduction-in-force is a short-term boost to per-employee profitability. While this undoubtedly improves the balance sheet, a RIF alone will not change the underlying mechanics of a B2B business. Absent change and absent revenue growth, companies may soon find themselves in a position where they need to make even deeper, more painful cuts. This can result in a vicious spiral. Organizations who decide on this path owe it to their employees and investors to pursue initiatives that boost sustained profitability over the medium- and long-term.
Value selling plays a significant role in sustaining B2B profitability by both aligning sales with their customers’ business needs and aligning the broader commercial team around value-based offerings that generate economic surplus for both themselves and their customers. B2B organizations with a newfound emphasis on profitability must look beyond the short-term and make customer value their “north star” organization-wide to thrive in 2024 and beyond.
